Contributions to pensions for individuals covered by the Labour Law will be deducted from October 1, with two million employees of more than 10,000 registered companies currently registered with the National Social Security Fund (NSSF).
The Ministry of Labour and Vocational Training and the Ministry of Economy and Finance jointly announced back on June 28 that the social security system would be implemented from July 1, in line with a March 2021 government sub-decree.
Heng Sophannarith, deputy director-general of the NSSF, told The Post on July 3 that the inter-ministerial announcement at this time serves as a reminder to those in the private sector and to give them more time to prepare.
He said the ministries would issue further instructions after October 1.
“We will issue three more announcements but, meanwhile, we have set the date for businesses to pay their pension contributions from October 1. The payment will be two per cent from employers and two per cent from employees. We have drawn up a list of obligated businesses, although there are some which have not yet registered,” he said.
With the announcement, Sophannarith sought to allay concerns that those in the private sectors will not receive the pension payments back. The money paid in would be returned to contributors according to when they leave their jobs, or reach retirement age.
“They will receive twice monthly pension payments when they retire at the age of 60. The payments will depend on their contributions. The minimum contribution is 200,000 riel [$50] and the maximum is 1,200,000 riel,” he said.
According to the sub-decree, NSSF members are entitled to receive a pension if they meet three conditions. They must be registered, be at least 60 years old and have made pension contributions for at least 12 months.
The sub-decree added that if a member has not fulfilled the last condition, he or she would not receive a pension from the fund, but could still collect an old-age pension. A person who had made contributions for less than 12 months could request a lump sum payment of the money they had paid in.
In the event of the death of an NSSF member, their contributions will be paid to their next of kin.
Sophannarith added that individuals could choose to increase their contributions and that this would be reflected in the payments they receive after retirement.
Payments will be made directly into each individual’s bank account.
Mengly J Quach, founder and chairman of Mengly J Quach Education Plc, has more than 1,000 employees. He told The Post on July 3 that his company was ready to meet its obligations so his employees would receive benefits in old age.
Mengly said contributions from the private sector play a big part in helping the country grow. Pensions mean all employees could be confident that they would feel comfortable in their retirement. Many countries had been providing similar benefits for many years, he added.
“I hope that all businesses contribute. They don’t have to wait for the government – all companies should make sure their staff have hope for their future. A payment of just two per cent will not affect the company much. I think it is time for this to be standard practice,” he said.
“All companies should adhere to the law. It’s not good enough to say why doesn’t the government have this or that. Some businesses have not contributed, and some have even manipulated their payroll taxes, without making payments,” he added.
Serey Roth, an employee of a private company in Phnom Penh, told The Post on July 3 that pension contributions are very important to her as employees would receive the same pensions as civil servants. It would alleviate the cost of living after retirement, she said.
However, she is concerned that the two per cent deduction is a significant amount and hopes the ministry will ease the contribution a little bit.
“If the ministry in charge of this work could reduce the contributions, that would be good. Private sector employees already pay 10 or 20 per cent tax on their salaries each month. Another two per cent could affect their daily lives,” she said.
Cambodian Apparel Workers’ Democratic Union president Ath Thorn said all businesses, registered or unregistered, should be easily able to fulfil their obligations, because the ministry has given them three months’ notice.
Thorn expected that once the pension system is in place, the benefits to employees will be significant. However, he warned that some companies were still trying to avoid providing benefits to their workers.
“Because these are new regulations, there are a lot of complicated documents to prepare, and putting systems in place may take some time. It is also really important that businesses that are not yet registered must do so immediately,” he added.